“We know that current climate finance is inadequate. We agree that the US $100 billion a year pledged in 2009 is too little, too late. But what we do not know and rarely discuss is that whatever is being given in the name of climate finance is not concessional – in the period 2011-20, only about 5 per cent was given as grants and the rest were loans or equity. It is then no surprise that what is termed as climate finance is not going to the countries where it is needed the most,” says Sunita Narain, director general, Centre for Science and Environment (CSE).
Narain was speaking at a recently organised webinar where CSE launched its latest report – Beyond climate finance. The webinar, addressed by global experts, and the report, preceded the two-day Summit for a New Global Financial Pact, which will kick off in Paris, France from Thursday.
Besides Narain, the speakers at the webinar included Anoopa S Nair, director, department of economic affairs, ministry of finance, Government of India; Pepukaye Bardouille, director, Bridgetown Initiative Unit and special advisor on climate resilience, Prime Minister’s office, Government of Barbados; Lola Vallejo, climate lead, IDDRI and UNFCCC co-chair of Mitigation Work Programme; and Rishikesh Bhandary, assistant director, Global Economic Governance Initiative, Boston university.
Avantika Goswami, programme manager, climate change, CSE says: “Developing countries are the places where losses and damage due to climate change are concentrated. These are also the countries that need finance for the climate transition to help them develop, without adding significantly to the stock of greenhouse emissions.” Goswami will be attending the Paris summit and reporting live from there for Down To Earth (see her contact details below).
The CSE report points out that developing countries face other financial handicaps that hinder their climate ambition — such as a growing debt crisis. Data from Debt Justice, an UK-based non-profit, shows that in 2023, 91 of the poorest countries made external debt-service payments averaging 16.3 per cent of their government revenues. CSE’s analysis shows many low and middle-income countries pay more in annual debt servicing costs than what they would need to spend annually to achieve their NDC goals.
Multilateral development banks (MDBs), an important source of concessional finance, are risk-averse and provide 80 per cent of the climate finance as loans, which worsens the debt crisis. There is also limited eligibility for middle-income countries to access concessional finance.
To add to this, MDBs’ mandate is being expanded to make financial flows “Paris-aligned”; this could be paternalistic and impose top-down criteria that may narrow funding streams to developing countries, says the CSE report.
